EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

EPAct Tax Incentives for Hurricane Sandy Damaged NYC Buildings

EPAct Tax Incentives for Hurricane Sandy

Damaged NYC Buildings

Hurricane Sandy damaged 18,000,000 square feet of large downtown New York
City buildings. In addition to required repairs, many of those buildings are
replacing and relocating large mechanical systems, moving them from low lying
basement areas to roof locations. Besides the mechanical equipment some of
these buildings are investing in waterproof building envelope measures such as
submarine style doors and new and enhanced foundations.

All of these buildings should give strong consideration to upgrading their
lighting to long life low wattage LEDs while contractors are already on site,
particularly if they have below a 75 Energy Star building energy benchmarking
rating For the 18,000,000 square feet, a potential $32,4000,000 in EPAct tax
deductions is available for the lighting, HVAC, and building envelope
upgrades.

The EPAct Section 179D Tax Opportunities

Pursuant to Energy Policy Act (EPAct) Section 179D, warehouse and building
owners or tenants making qualifying energy-reducing investments in their new or
existing locations can obtain immediate tax deductions of up to $1.80 per
square foot.

If the building project doesn't qualify for the maximum EPAct Section 179D
$1.80 per square foot immediate tax deduction, there are tax deductions of up
to $0.60 per square foot for each of the three major building subsystems:
lighting, HVAC, and the building envelope. The building envelope is every item
on the building’s exterior perimeter that touches the outside world
including roof, walls, insulation, doors, windows and foundation.

The New York City Mandatory Bench Marking Process

New York City buildings that exceed 50,000 square feet, or multiple
buildings on the same lot that exceed 100,000 square feet, need to be annually
benchmarked for energy and water use. The law requires benchmarking by major
individual building categories including office buildings, hotels, schools,
parking facilities, hospitals, warehouses, multifamily houses, and retail
stores.

It will be the building owner’s responsibility to gather the
information and report it on the online database system provided by the United
States Environmental Protection Agency (USEPA). This system, which is organized
by what is called ESPM (Energy Star Portfolio Manager), will rate
building’s energy usage in comparison to other benchmark buildings in the
nation on a percentile scale of 1 to 100 (1 being the least energy efficient
building and 100 being the most energy efficient building).

It is the owner’s obligation to continue with mandatory benchmarking
rules annually within the month of January. To date, large building owner
operators have been the most frequent users of Energy Star benchmarking
data.

In NYC, in a large tenant/landlord market, it is anticipated that tenants
will be prominent users of benchmark data.

Fortunately the benchmark data input process is relatively straight forward,
and all the information is disclosed to the public, so comparisons can be made
and contrasted to other buildings that are similar within the nation. Energy
benchmarking can be further strategically utilized by the owner in order to
improve their building’s energy performance, lower their energy
consumption, and increase cost energy savings.

In the wake of Hurricane Sandy, many new building developments were put on
hold, adding millions to project costs. In addition to project delay, costly
waterproofing methods are being implemented including installation of
floodgates and submarine style doors in mechanical rooms.

Real estate developer, Time Equities, has recently hired the Albanese
Organization as their development manager. The Albanese Organization owns and
develops properties in Battery Park City and other surrounding areas including
the Visionaire, the Verdesian, and the Solaire. Robert Singer of Time Equities
explained that the Albanese Organization is the perfect choice to handle the
project being that during Hurricane Sandy, Battery Park City was the only place
that maintained electricity.

Time Equities plans to expedite design on 50 West Street, their 62-story
building, estimating that the foundation work will begin in late spring/early
summer or this year.

Jack Becker of Albanese is also advising Time Equities on their 50-story 111
Washington Street, where the electrical/mechanical systems are being moved from
the basement to a higher floor.

Conclusion

Suffering substantial property damage is painful for all impacted including
tenants, building owners, and building employees. However if thoughtful repairs
and improvements are made the result will be a better sustainable building with
substantially less energy related operating costs. EPAct tax incentives can
help further alleviate some of the pain.